Macroeconomic Announcements and Implied Volatilities in Swaption Markets

8 Pages Posted: 13 May 2012 Last revised: 29 Sep 2013

Date Written: September 1, 2004

Abstract

Some of the sharpest movements in the major swap markets take place during days of US economic data releases. These yield movements induce spikes in volatilities during those days. Swaption prices adjust to reflect the spikes: the volatilities implied by these prices tend to fall once the volatility spike induced by an announcement has passed. For a given type of announcement, the decline in implied volatility is consistent with the average size of the spike in realized volatilities.

JEL Classification: G10, G14

Suggested Citation

Fornari, Fabio, Macroeconomic Announcements and Implied Volatilities in Swaption Markets (September 1, 2004). BIS Quarterly Review, September 2004, Available at SSRN: https://ssrn.com/abstract=1968343

Fabio Fornari (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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